The treatment of multioffset seismic data as an acoustic wave field is becoming increasingly disturbing to many geophysicists who see a multitude of wave phenomena, such as amplitude‐offset variations and shearwave events, which can only be explained by using the more correct elastic wave equation. Not only are such phenomena ignored by acoustic theory, but they are also treated as undesirable noise when they should be used to provide extra information, such as S‐wave velocity, about the subsurface. The problems of using the conventional acoustic wave equation approach can be eliminated via an elastic approach. In this paper, equations have been derived to perform an inversion for P‐wave velocity, S‐wave velocity, and density as well as the P‐wave impedance, S‐wave impedance, and density. These are better resolved than the Lamé parameters. The inversion is based on nonlinear least squares and proceeds by iteratively updating the earth parameters until a good fit is achieved between the observed data and the modeled data corresponding to these earth parameters. The iterations are based on the preconditioned conjugate gradient algorithm. The fundamental requirement of such a least‐squares algorithm is the gradient direction which tells how to update the model parameters. The gradient direction can be derived directly from the wave equation and it may be computed by several wave propagations. Although in principle any scheme could be chosen to perform the wave propagations, the elastic finite‐ difference method is used because it directly simulates the elastic wave equation and can handle complex, and thus realistic, distributions of elastic parameters. This method of inversion is costly since it is similar to an iterative prestack shot‐profile migration. However, it has greater power than any migration since it solves for the P‐wave velocity, S‐wave velocity, and density and can handle very general situations including transmission problems. Three main weaknesses of this technique are that it requires fairly accurate a priori knowledge of the low‐ wavenumber velocity model, it assumes Gaussian model statistics, and it is very computer‐intensive. All these problems seem surmountable. The low‐wavenumber information can be obtained either by a prior tomographic step, by the conventional normal‐moveout method, by a priori knowledge and empirical relationships, or by adding an additional inversion step for low wavenumbers to each iteration. The Gaussian statistics can be altered by preconditioning the gradient direction, perhaps to make the solution blocky in appearance like well logs, or by using large model variances in the inversion to reduce the effect of the Gaussian model constraints. Moreover, with some improvements to the algorithm and more parallel computers, it is hoped the technique will soon become routinely feasible.